Tender offers and gains division : an analysis of the bidder’s bargaining power
AbstractThis paper investigates the impact of the bargaining power of the acquiring company on the division of gains between the two firms, and particularly its capacity to retain a high part of the created value. Our experimental hypotheses are based on theoretical models which explain the tender offer process as a game between the bidder and the target. The different models analyse two aspects of the problem : (1) the relation between the bidder and the target shareholders, which define a minimum acceptable price, particularly taking into account the free-rider problem, and (2) the relation between the bidder and potential competitors, which explain how the initial bidder can avoid competition and thus define a pre-emptive optimal strategy. For our sample, the total gain is FF687 million per operation : FF241 million for the acquirer and FF446 million for the target. It is found that the bargaining power of the bidder is stronger when the acquisition is highly synergistic : in this case the acquirer can retain a higher part of the total gains. Its power on the target’s shareholders can also be increased by different incitative mechanisms. For our sample, two of them have a significant postive impact on the bidder’s abnormal returns : the fraction of the target shares controlled prior to the acquisition (as in Schleifer and Vishny’s model), and the threat of minority shareholders’dilution (as in Grossman and Hart’s model). In opposition to several models and previous studies, the method of payment has a non significant impact on the bidder’s abnormal returns.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Montpellier University, Center for Research in Finance in its series Accepted Papers Series with number 1999-1.
Length: 9 pages
Date of creation: 01 Jan 1999
Date of revision:
Publication status: published in Finéco, vol. 9-1
Note: article in french language
Contact details of provider:
Postal: Bâtiment 19, Place Eugène Bataillon, 34095 Montpellier Cedex 5
Web page: http://www.cregofi.univ-montp2.fr/
More information through EDIRC
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael Kaestner) The email address of this maintainer does not seem to be valid anymore. Please ask Michael Kaestner to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.